HSBC has become the first British bank to be given the green light by the
financial regulator on its capital position, ahead of a report expected to
identify shortfalls at several lenders.

Stuart Gulliver, chief executive of HSBC, said the bank, which on Monday reported a pre-tax profit of $20.6bn (£13.7bn), had been given permission to increase its dividend by regulators after convincing them the bank had a large enough buffer to weather any new financial crisis.

The bank said it would now increase its dividend for 2012 by 10pc to 45 cents, which will see the lender pay out $8.3bn to its 220,000 shareholders, which include most of the UK’s largest pension funds and fund managers. On top of this, the bank said it would increase its first three quarterly interim dividends for this year by 11pc to 10 cents per share.

Mr Gulliver said the cash distribution was only possible because Britain’s banking regulator was “comfortable” with the bank’s financial position and that he wanted to put “clear water” between HSBC and other lenders.

“Over the last three or four years we’ve kind of slipped back into the pack. Now we’re re-establishing the clear water between HSBC and other banks in terms of being incredibly well capitalised,” he said.

The Financial Services Authority is expected to publish its report on bank capital levels towards the end of the month, with speculation growing that several major lenders could be told they need to raise new money to cope with the cost of any write downs.

HSBC’s profits have meant it has weathered the crisis better than most other UK banks. The bank’s $20.6bn pre-tax profit for 2012 came despite a record $1.9bn fine in the US following a money-laundering investigation, as well as provisions against mis-selling claims of $2.2bn, including $598m for interest rate hedging products.

The profit represented a fall of 6pc year-on-year, largely as a result of an $5.2bn accounting charge against the value of the bank’s own debt. However the bank’s profit compared to losses at state-backed lenders Lloyds Banking Group and Royal Banking Scotland, and a statutory profit from Barclays of £246m.

Shares in HSBC closed down 2.4pc yesterday at 710.97p, valuing the bank at £131bn.

The fall came as investors weighed up the bank’s lower than expected profits, which were nearly $3bn below consensus analysts’ forecasts.

Mr Gulliver hit back at the suggestion the bank did not know what to do with its surplus capital, in particular that the increased dividend represented a sign of this.

“I don’t think the dividend increase of 11pc for the first three [quarters] of next year and the final dividend, an increase of 10pc over the previous year, indicates anything other than confidence. It doesn’t indicate that we don’t have an opportunity to invest organically. That would be signalled by a much higher dividend increase,” said he said.

Mr Gulliver also dismissed suggestion that HSBC could review the locating of its headquarters London on the back of last week’s announcement of an EU-wide bonus cap, saying it was “far too early” to assess the significance of the draft rules.

However, HSBC now generates 85pc of its revenues in emerging markets and the bank’s operations in the UK made a loss last year of $1.08bn, while its US business lost $2.5bn. The UK loss was driven by the US fine, which was booked through its British holding company, and the cost of PPI and interest rate swap mis-selling claims.

Hong Kong was by far HSBC’s most profitable business, recording a 24pc rise in profits to $7.2bn, ahead of a $1.1bn pre-tax profit in Brazil, which was the bank’s next most successful operation.

The largest slice of the profits came from HSBC’s retail banking and wealth management division, which reported a pre-tax profit of $9.58bn, more than double the unit’s profit the previous year. Commercial banking was the next most profitable business line, making $8.54bn, closely followed by global banking and markets, the lender’s investment banking arm, which made a pre-tax profit of $8.52bn.

The bank also revealed that 204 of its employees had received packages worth more than £1m, of whom 78 are based in the UK. In all, 314 so-called “code staff” received salaries and bonuses worth $384m, or $1.22m per individual, according to a series of detailed pay disclosures made by HSBC in addition to its annual report and accounts.

Bonuses at HSBC totalled $3.7bn, down about $500m on the $4.2bn it paid out last year, however the bonus pool in the bank’s investment banking arm rose slightly from $1.21bn to $1.27bn.

Mr Gulliver’s own compensation totalled £7.4m, down from £8.1m last year. The package included an annual bonus worth £1.95m, compared to a bonus the previous year of £2.2m, while his long-term share award was cut from £3.75m to £3m.

The HSBC chief’s package only made him the second highest paid executive at the bank after an unnamed employee, likely to be a senior manager in the investment bank, who received a pay and bonuses worth £11.1m.